NEW YORK (AP) — Oil prices retreated in early Sunday trading, continuing a slide from a two-month peak reached last week, as both the United States and Iran held back from launching new military strikes in the Persian Gulf for the second day in a row.
The price of a Brent crude oil barrel set for September delivery tumbled 4.9% to $92.02 shortly after markets opened. That followed a 3.9% decline on Friday.
Brent crude, which serves as the global benchmark, briefly climbed to $102 per barrel last week — a full $30 higher than where the most actively traded contract had been trading at the start of the month, and the highest price point since May.
The spike in oil prices this month has been driven by intensifying conflict in the Middle East and growing fears that a full-scale war could further disrupt the worldwide flow of crude oil.
A central worry for oil markets has been whether tankers can safely navigate the Strait of Hormuz since the U.S. and Israel struck Iran in late February. That narrow waterway along Iran’s coast typically serves as the passage for about one-fifth of the world’s oil supply as it moves from the Persian Gulf to buyers around the globe — and the ongoing conflict has largely shut down shipping traffic through the area.
Oil-producing nations have been scrambling to find alternate shipping routes, but those paths are also coming under threat. Last week, Saudi oil tankers attempting to use the Red Sea as an alternative route were hit in attacks. When oil supplies tighten, prices rise — and that means higher costs at the gas pump as well.
Across the United States, drivers were paying an average of $4.11 per gallon for regular gasoline as of Sunday, according to motor club AAA. That’s up from $3.90 a month ago and a significant jump from just $3.15 a year ago.
If oil prices remain high, the ripple effects could push up the cost of virtually everything that gets transported by truck, ship, or plane — including groceries. While the U.S. economy is still growing, the prolonged conflict with Iran has been weighing on consumer confidence.
The renewed climb in oil prices this month came at an especially difficult time — just as inflation had been cooling faster than economists anticipated. Now, traders are pricing in a 36% probability that the Federal Reserve will raise its key interest rate at an upcoming meeting, based on data from CME Group.
Raising interest rates can help slow inflation, but the tradeoff is that it makes borrowing more expensive for everyday Americans and businesses alike, which can put the brakes on economic growth.
Long-term U.S. mortgage rates have already climbed to their highest point in nearly a year, dampening activity in the housing market. Costlier borrowing could also slow the rapid expansion of artificial intelligence data centers, which have become a significant driver of U.S. economic growth.
Although oil prices have given back some of their July gains, considerable uncertainty still hangs over the market.
The benchmark U.S. oil price for September delivery fell 5.6% to $84.34 on Sunday, following a 3.1% drop on Friday. Meanwhile, the October Brent crude contract — now the most actively traded — declined 4.6% to $87.48.
